Infographic: How The Poor Spend Their Money Vs. The Middle Class

In a sentence, the upper class are left with a lot of spare cash to invest in their future.

The rich get richer. It’s one of those old mantras that’s tough to really calculate. After all, didn’t everyone’s 401k tank in the last few years? Don’t rising gas prices suck equally for everyone? Yes and no. This infographic by NPR/Planet Money’s Lam Vo breaks down "How The Poor, Middle Class And The Rich Spend Their Money." And its clear graphical presentation of social spending is enlightening.

You see that we all spend about the same (proportional) amount on housing, clothing and entertainment. But where the rich spend proportionally more is in education and saving for retirement (3x more than the poor in education and about 6x more in retirement). It’s percentages that the rich can make up because they have more overall income to spend on the bare necessities of food (even though they eat out more), utilities, transportation and healthcare.

So the next generation, the kids of these families, have different outcomes, too. Their parents have either prepared for retirement, or may need help. Their parents have either invested a lot in their education, or may have left them with debts from school. And then, when you realize that not only are the rich spending larger percentages of their incomes on these future investments, but that the gross dollar amount of each percentage is even larger because their base income is so much larger. The end numbers, even if they’re not pictured here, are worlds different. That matters because these investments are precisely those that track with the earning prospects of future generations—and thus, the well-off do fine, while everyone else falls behind because they inherit less money and get less higher education.

It just goes to show that, if our priorities are setting up solid futures for the low and middle class, then we either need to free up some percentages in those big ticket unavoidables—the housing, utilities and transportation—or find a better means to support retirement and education elsewhere. Because despite what our middle school gym teachers told us, there’s just no way to give 110%.

[Image: Viktor Gladkov/Shutterstock]

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18 Comments

  • Enrique

    What about the group that makes between $20,000 and $49,999.  You know, those people known as "the middle class."

  • Mike A

    In a sentence, did we need this study to tell us the upper class spends more on education and saves more for retirement? Isn't that fact common sense? We must assume when you say "the rich" in the second paragraph you refer to those making $150k a year or more in income. Are they then the rich or the middle class? $150k a year is not rich. It's a substantial income in most parts of the country, but it's far from rich. The top 1%, with annual income north of $380k is a better threshold for defining rich: http://economix.blogs.nytimes....

  • Adron

    Thank you for pointing that out.

    A person in NYC w/ 150k is barely middle class while a person making 60k in Louisiana is well into the middle class.

    In addition you have to motivate people to get involved in becoming educated. Without this motivation there's no point in trying to "educate" them in other ways. They'll stay poor until they, or we, or someone figures out a way to motivate all people into a better understanding of the world around them and how people operate. 

    Also this leads to the Bell Curve concern. In the end, wealth generally follows not so much education, but intelligence. Education then follows those that are intelligent.

  • Rick H.

    Another study falls victim to "garbage in, garbage out!" An hour spent at one of the malls in a lower-income part of suburban Maryland or Baltimore would prove this study false. Or perhaps the NPR reporter never ventures into the real world.

    The kids in the poor areas seem to place more emphasis on name-brand clothing than middle class kids. They also attach more status to -  and appear to have as many - the latest iPhones and similar name-brand accessories than the middle class kids. To many of the poor the word "frugal" is an insult. 

    Alas, the NPR reporter doesn't understand that many of the poor have more disposable income than the middle class - the spending on their behalf by federal, state, and local government often exceeds their income. This is why 48% of Americans pay no net income tax when you balance their taxes vs. services provided by governments. The disparity is even greater with illegal aliens, who receive government services and often don't pay any taxes. 

    Notice that the survey didn't touch on drugs or alcohol or state lotteries - vices that can keep people poor. In America you may be born into economically-challenged circumstances, but only habits or disabilities can keep you there.  

    Perhaps NPR can find a reporter with experience in the real world, or without a social agenda aimed at wealth redistribution, who can produce an accurate article. 

    - R. 

  • Tkas

    Where are the charitable donations and the tax burdens of the various groups? Where state and federal give-aways factored in to the lowest income brackets? The upper brackets are paying full freight for their kids to attend college. They have to save up for those tuitions because they subsidize those who don't or can't.

  • Lola Lee Beno

    There's something missing from the infographics.  What?  Oh, the 20K-50K range AND the 70-150K range.  Why?  

    I think a more fair comparison would include these ranges. 

  • David Curtis

    One easy "fix" would be to change how many employer matching contributions are structured for 401(k)s and other retirement accounts. Not all jobs offer matching plans, but those that do can ensure that plans are more equitable in ensuring that one's post-employment years are livable.

    Plans that match a percent of salary end up favoring the high earners at the expense of low earners. My previous employer matched dollar-for-dollar up to 5% of pre-tax income. We had high earners making $260K a year who could contribute 5%, or $13K (the maximum allowable contribution under federal law at the time), and see it matched dollar-for-dollar by the employer, for a total of $26K. We also had low earners making $52K who would scrimp and save to put away 10%, or $5.2K, only half of which was matched for a total of $7.8K. It's nearly effortless for someone making $260K to put away 5%, but it's tough as hell to put away 10% on an income of $52K. Why should the employer lend an extra hand to the high earner?

    A better plan would be one that matches the first $5K of employee contributions dollar-for-dollar, and doesn't consider income at all. In this scenario, our employer would match the maximum $5K for each employee, resulting in a total of $18K for the high earner and $10.2K for the low earner.

    The point isn't that high earners should have money taken away from them, but that primary goal of retirement is to ensure that one has enough money to LIVE on. I understand creating incentives to attract talented, high-earning individuals, but matching-contribution programs for retirement accounts should be built to ensure livability, rather than structured to benefit the top at the expense of the bottom.

  • Mae

    Not everybody has time or the resources to be able to spend some time in the grocery store, planning out meals and then preparing those meals -- especially in the lower income brackets.  For people who are on the lower end of the economic spectrum, they are sometimes are unable to find reasonable daycare (you can't argue that childcare is actually affordable or at least easily obtainable to lower income families), and work more than one job which can lead to finding ways to make it easier by going out and simply buying prepared food.  

    Also, in terms of the entertainment, I wouldn't fault them for wanting to go out and have some fun -- it can be emotionally and psychologically draining to be low-income which could result in a greater desire to spend on short-term strategies for relieving that stress as opposed to saving for education, etc.  Going and watching a movie or something similar can at least alleviate some of that stress for a couple hours.  

    And in case you wonder why many of the lower income folks don't just consider going back to school; work schedules, daycare/child responsibilities, funding obstacles (for example, vocational schools don't help with housing, food, and oftentimes textbooks at the Bachelor's level that traditional universities may by awarding the extraneous funding from FAFSA), and the amount of time it would take to complete an education versus just working and making money in the here and now are all things we should consider when reflecting on how the poor vs. the middle class live.  I'm pretty sure that those who live in poverty are just trying to survive to the next day which explains why they don't consider things like future education, savings and retirement.  

  • Shelmarie

    As a member of the middle class, I'm just wondering why we, or "they"- the people profiled for the statistical data presented in the infograph- are spending so much on entertainment & other non-essentials, instead of more on education, savings, and retirement.  Eating out - approx. 5% of spending.  5% of $50k is $2,500.  At $5 a pop, that's a lot of Big Macs.  500 Big Macs a year. 

    Fewer Big Macs = More Savings for College/Retirement

    Ok, so maybe they didn't buy Big Macs.  Maybe "they" have a Sushi addiction...I can totally relate to that.

  • Carl

    This study needs to be age-banded to produce meaningful/actionable insight.  It has been studied but under-reported that if you look at one household throughout its entire lifetime, they start out 'poor', progress through 'middle-class' status as they progress through their career, and then revert back to lower income status as they live on a fixed income in retirement.  So when income distribution studies ignore the age (and family status) of the households in the studies, they knowingly or unknowingly lead people to believe that there are impenetrable barriers between income levels, when, in reality, many households pass through these barriers every year in both directions.  The other piece of data this study ignores is household wealth.  There are many people that have inherited or won wealth through estates or insurance, or who live on donated goods/services, which allows them to live well on low incomes.

  • ogese

    Well said Carl.  Studies like this are usually designed to prove a point like "we need more education programs for the poor" and "we need to subsidize savings programs".  Usually organizations that benefit from the resulting data are responsible for publishing these studies. Often, arguably, it is designed to "divide and conquer" people into ethnic, class, ideological and sometimes religious divisions. As a result, unbiased logical analysis such as existing savings, inheritance, age, family relationships, debt and geography don't get mentioned as these factors tend to level out the results and show "we are all the same after all".

  • dkural

    Debora, your comment is simply factually incorrect. Equal access to education, retirement benefits, and healthcare is the #1 reason why Europe & Argentina have more social mobility compared to the United States, contrary to popular belief.  The Economist, a well respected free-market leaning liberal newspaper has published numerous briefings on the subject if you don't believe the economists and sociologists from universities.

  • ogese

    Dkrural - I used to buy the story that social engineering in European democracies and places like Argentina was vastly superior to the US simply because people from those countries said so. But then I lived in those countries and found that it simply isn't true. After living in Spain, the UK and the US and having spent a lot of time in Latin America and the Caribbean, I feel that poor people stuck in poverty in bad neighborhoods in Buenos Aires, London, Madrid and D.C. are all pretty much subject to the same traps of crime, poor habits, poor mental health, limiting traits like ghetto accents and demeanor as their counterparts.  The only difference is that we in America are more likely to admit to our problems and publish studies like the one above or make movies about our nasty social issues.  These songs/books/studies might make upper middle class Argentinians think that every non-millionaire in America lives like the people in the movie "8-mile" while every Argentinian pretty much lives in nice gated communities and has great educational opportunities like them.

  • Debora Fabiana Valentinuzzi Sp

    Mark, in other Countries like Argentina, education even at University level has been free for more than 30 years. Despite this, NO change in class mobility has been observed from the time where it wasn't. Furthermore, in 1977 they even stopped asking people to take exams to be admitted and they accepted and attempted to level everybody. It failed, they ended up having to reinstate an entrance exam. The problem is a lot more complex than what is depicted here and can only be studied using game theory

  • LuongSon

    People is responsible themselves to their earning and spending. This survey is a too commercial and political! 

  • ogese

    I agree Debora, policies in many parts of the world ignore people's individual motivations and naively believe that what politicians tell them is going to happen in real life.  The statement that "Healthcare is free and education is free so therefore everyone in our country is more educated and healthier than the most developed nation of Earth where people have to pay" has been a favorite tool of some governments who use it to counter the observations of disgruntled citizens who feel that they really aren't better off. It has worked for sometime, but I think people in places like Cuba, Venezuela and several places in Western Europe are beginning to realize that politicians are just as shady as ours (in some cases, worse!).  They are learning that "healthcare", "opportunities" and "education" are not commodities that are always equal regardless to who provides them.